Appletree Apartments

Location: Rexburg, ID

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Description:

Appletree Apartments has been a married student housing provider for Brigham Young University-Idaho since 2003. The ownership includes seven six-apartment buildings and a four apartment small house. It has proven to be a successful small business, with an Internal Rate of Return over 14% over the past five years.  This model that we have provided includes a pro forma income statement and balance sheet that has variable values. We have made several assumptions that may change from year to year. Our research has shown that the numbers provided on the pro forma statements are fairly accurate.

In the model, along with the pro forma financial statements, we have included an analysis of cost of capital which from our calculations equals 4.15%.  Our analysis of the internal rate of return showed a value of 23%. We were not able to meet the previously stated 14% internal rate of return with our pro forma numbers.   We have attempted to change the input values into these two analyses, however, no reasonable changes of proportions or inputs allowed the weighted cost of capital to equal the internal rate of return.  Beta for this apartment complex was assumed by averaging the betas of eleven different large public real estate companies to come up with a value of .23.  

Due to the high internal rates of return and low cost of capital, along with other factors included in our model, we have concluded that purchasing this apartment complex would be a good investment.  Revenues are estimated to continue increasing with high demand for apartment complexes in the Rexburg area, and expenses are expected to stay consistent. Due to large retain earnings amounts in the pro forma, opportunities for reinvestment into the complex or additional real estate investments are expected to be very possible.